Connecting Iraq

Most Iraqis have never used the internet or a mobile phone and now satellite communications companies are making up for the absence of conventional telecomms networks

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By  Massoud Derhally Published  June 1, 2003

|~||~||~|Even in the worst of times, there is room for entrepreneurial spirit. The absence of a telecommunications infrastructure has given rise to a basic form of enterprise, with Iraqis selling minutes on satellite phones to their brethren for as much as $10. These are desperate times and as survivors of the war try to stay in touch with relatives and family, business is good for those with satellite telephones.

Those who came up with the original satellite phone archetype known as Iridium, which was sold for only $25 million after it filed for bankruptcy, must be envious of the business coming the way of the Thuraya Satellite Telecoms Co., established in 1997 by Etisalat, Abu Dhabi Investment Company, Arabsat and Qtel. Iraq, unlike most of the Arab world, doesn’t have a mobile operator and the only network in place served officials of the Baath regime. In the absence of a GSM network, the company has seen its business in Iraq surge.

Before the Iraq war started, the company registered in the Middle East alone more than 200,000 air minutes per day. In pre-war times, the company recorded 5,000 to 10,000 minutes a day out of Iraq.
Then, in the month of April alone, the company sold 12,000 handsets. “During the war it [airtime used in Iraq] went up to 50,000 to 60,000 minutes a day and now it is over 100,000 minutes a day,” says Mohammad Hassan Al Omran, chairman of Thuraya. Traffic from Iraq now accounts for 20% of Thuraya’s overall revenue, says Omran.

Omran, who estimates Thuraya will have around 40,000 to 50,000 subscribers by year’s end in Iraq alone, believes there is money to be made. “Iraq has no other network and it will take time to build one and even then it will only be in the main cities,” he says.
In the meantime, the company, which operates through a distributor network, has so far concluded agreements with at least five global service providers to help deliver thousands of Thuraya’s $600 handsets to Iraq. Omran sees plenty of business on the horizon.

“There is a lot of reconstruction on the way and people who will be involved in reconstruction of the country will need to communicate,” he says. “There are also four to five million Iraqis living abroad and they will need to communicate with their families in Iraq,” he adds.

However, Iraq, economically speaking, is crippled and Iraqis can barley afford daily necessities, let alone buy expensive satellite phones. That’s why Thuraya has tried to come up with an alternative to its expensive handsets. The company has developed a cheaper mechanism for making calls, through a public phone system.

“In Iraq and in the region we have developed what is called a public call office, whereby people can sell airtime at a cheaper rate than mobile rates. We have developed this and are now signing on distributors who will be taking it to Iraq,” says Omran. The company is also talking to several countries, including Pakistan and Algeria, to have a similar set up in rural areas.

However, whilst Thuraya fills a vital gap in the short termwhat about the long term outlook? Two years from now, the national fixed telecommunications network will be in much better shape and a national GSM network should be in place, or close to completion.
Omran says that the company’s business model since the beginning has been built to cater to areas where conventional communications is not available.

“If you look at Iran, Nigeria or Algeria, normally the main telecommunications network and GSM network are in the main cities but not in rural areas,” says Omran. “Our business model is to serve those areas not served by the GSM [networks.] We do cover 100 countries. Normally we target 2-5% of GSM users in a country to be our customers, so we’re talking about a small number.”

Omran admits that the company did not hit its target of 400,000 subscribers in its first year of operation. Thuraya had also aimed to fill its satellite’s capacity of 1.8 million users by year four of operation.

However, he tries to emphasise that, “the 76,000 direct users Thuraya currently has are making double the income expected, as if we were making revenue from 150,000.”

By the end of 2003, Thuraya estimates that it will have somewhere between 180,000 and 200,000 users. In the meantime, Thuraya must compete with Iridium and Inmarsat for business in Iraq. For Inmarsat, business in the Middle East is also on the rise.

“34% of our traffic comes from the Middle East and North Africa and in the first three months of this year we have an estimated $9 million of revenues related to the increase in traffic from the Middle East,” says Samer Halawi, regional manager for Inmarsat.
In the first quarter of 2003, Halawi that says the GAN terminal, which is widely used by journalists as a videophone, was responsible for some of the largest increases in traffic. CNN most famously used GAN terminals to relay live images, especially from remote regions, when conventional satellite uplinks were not available. The mini m also proved popular in Iraq with those who required voice communication and basic data transmission capabilities.

All in all, if business in the Middle East is good, it’s even better in Iraq. To make sure the company didn’t have a congested network during the Iraq conflict, Inmarsat went so far as to activate one of its spare satellites.

Traffic has levelled off with the winding down of the war but the company is trying to position itself for the future. “We are looking for distribution partners that are strong in that part of the world and we are looking to expand our distribution chain,” says Halawi.||**||

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